Cromwell faces downturn head-on

Paul Weightman expects a soft office rental market in Brisbane for next 12 months to two years.
Photo: Glenn Hunt

by
Larry Schlesinger

Cromwell Property Group
is well positioned to weather a prolonged downturn in the Brisbane office ­market, said chief executive
Paul Weightman
during the group’s annual meeting, where a sizeable protest vote was registered against five of the 11 resolutions.

These included the granting of performance rights and shares to Mr Weightman and finance director
Daryl Wilson
, which was opposed by proxy holders representing 24 per cent of issued shares. All resolutions were passed including the remuneration report with a 96 per cent yes vote.

After the vote, Mr Weightman said there was still some softness in office demand in Brisbane due to the government reducing its requirements and the slow down in resources.

“We expect a relatively soft rental market over the next 12 months to two years, but we are in a strong position with a low expiry rate and long WALE (Weighted Average Lease Expiry) across our portfolio," he said .

“On the capital side, there is lot of money chasing assets, in large part from offshore investors but also from institutional investors, who are looking to increase their allocations to direct property."

The result, he said, was that core property was in high demand resulting in quite substantial cap rate compression, offsetting rental softness.

Mr Weightman said the pressure was in the secondary market and that is where Cromwell saw value.

He said the company would look to acquire assets providing good income and that would benefit from a “real value kicker" when there was an upturn in the secondary market in the next few years on the back of improving white collar employment.

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Earlier in the meeting, Cromwell chairman Geoffrey Levy said the votes against the granting of performance rights were from proxy advisers it had not met before, and concerned the detail and transparency of key performance indicators and hurdles.

“We will meet with these proxy advisers to find out what they require to tick these boxes," said Mr Levy.

“We will do what we can to be more transparent, but if they demand ridiculous hurdles . . . designed to force up the share price they will have to get rid of the board."

“We are trying to maintain income [from our properties] so we can pay distributions."